Eskom has been asked by Public Enterprises Minister Lynne Brown to give municipalities until the end of this month to settle their outstanding debts to the power utility before cutting their power supply.

Brown explained that cutting power would not only affect ratepayers and municipalities, but have a “potentially disastrous effects on businesses and jobs”.

“One cannot help feeling sympathetic to those who pay their electricity bills in good faith, only for the payments to be consumed by municipalities with precious little income and resources,” Brown said in a statement. “This is a matter of national importance that I would urgently hope to discuss with the Minister of Finance.”

Brown urged defaulting municipalities to clear their debt quickly.

Eskom on shaky financial ground

Eskom has been under financial pressure in recent months, which has placed more pressure on the power utility to collect outstanding fees and generate revenue.

“The security of future revenue is paramount to Eskom’s sustainability,” Brown said. “It is critical for all municipalities to institute pre-paid billing to help build a payment culture.”

She said a “healthy Eskom” would contribute to the positive sovereign rating of South Africa and added that the country could not afford an Eskom “whose ability to borrow from financial markets is constrained by the prohibitive interest rates arising from the negative financial position” – which will result if this matter was not resolved.

Brown acknowledged the cooperation of municipalities that settled their debts, and said: “I am particularly humbled by the intervention of the respective Premiers and committees’ willingness to join hands with the relevant stakeholders in an effort to find a lasting solution in our country’s interest.”

Free State makes payment plans with Eskom

At the end of last week the Free State provincial government and Eskom met to discuss payment plans to resolve the province’s outstanding debt to Eskom.

The talks were led by Eskom’s interim group chief executive, Matshela Koko, and the director general of the Free State office of the Premier, Kopung Ralikontsane.

Koko said both parties agreed to suspend electricity supply interruptions to the seven defaulting municipalities in the Free State following their payments in line with the PAJA (Promotion of Administrative Justice Act) process.

He added that the province’s January account would be settled by mid-February.

Additional agreements made on prepaid meters and billing concerns

Both parties acknowledged that while the outstanding arrear debt cannot be written off, certain elements needed urgent review.

“We also agreed on the installation of prepaid meters as being the lasting revenue management solution which can help us avoid the current debt escalation,” Ralikontsane said. “We should be able to start implementation by July 2017 at the latest in a number of municipalities. We encourage municipalities to sustain current account payments to Eskom.”

The provincial government delegation raised billing issues and a commitment was made to engage on these within the next two weeks.

“The meeting further agreed on the dates of March and May 2017 to conclude the administrative processes that are needed to allow Eskom to complete the Revenue Management function in the identified municipalities,” Koko said.

“This will create a space for implementation to start after March and July 2017 respectively,” he added.